The federal government defines rent-burdened as paying more than that 30%  threshold.

The typical American renter now falls in that category, according to a recent report from Moody’s Analytics. This marks the first time that’s occurred in the more than 20 years that the ratings agency has been tracking the metric.  

“If we’re looking at the low- to moderate-income families, they are taking 40% and above all of their income on the rent, even if the metro [area] itself hasn’t crossed that 30 line yet,” said Moody’s Analytics senior economist Lu Chen.

While tenants in many U.S. cities have long spent at least 30% of their income on housing, the fact that this threshold has been passed at the national level marks a new milestone for housing affordability.

While increase in rent has slowed in recent months, median asking rents are still rising and jumped by 2.4% in January alone.

Housing Shortage

Both rents and housing prices have been fueled by a long-term housing shortage, with home construction long lagging behind demand.

Although construction rates began to improve in 2021, the shortage has kept many would-be buyers as renters, putting more pressure on the rental market and driving up prices.

“We haven’t been building enough homes in either market [rental or purchase]. And that has led to either record low vacancy rates like we’re seeing in the market for homeowners, or very close to all time low vacancy rates in the rental market,” said Danielle Hale, chief economist at

“In order to compete to find a place to live, Americans are having to fork over more of their monthly budgets.”

Rising mortgage interest

High mortgage rates compound the problem, as those who want to transition to homeownership are locked out of that market by rising interest rates, said Nicole Bachaud, a senior economist at Zillow.

The benchmark mortgage rate is ticking up again after falling below 6% in early February for the first time since September.

Near their peak, average rates drove up monthly mortgage payments by nearly 50% from 2019 levels. This brought the typical payment to more than $1,800 each month, according to a report from the National Association of Realtors.

“We’ve seen mortgage rates going way up, and now that mortgage payment is much higher than rent in most of the country,” Bachaud said.

The nation is falling short of the demand for affordable housing by at least a million homes in some estimates.

Effects from the pandemic 

During the height of the COVID-19 pandemic, renters were more likely to be employed by industries impacted by job loss and financial instability, two factors that negatively impacted incomes, Bachaud said.

And the crisis intensified when those with resources left high-density areas for smaller markets with abundant space and less expensive homes.

However, when lockdowns began to ease and offices started requiring employees to return to in-person work, rental prices in more populated areas crept higher.

“Nationwide, we were seeing rents grow faster for the first time in urban areas than we were seeing in suburban areas,” said Hale, the economist.

Rising Incomes,Inventory Boosts could help

Bringing the rent-to-income ratio back beneath the 30% threshold will require changes to one or both sides of that equation: Rent prices or wage levels.

A spate of new buildings could also help drive down rent prices by supplying an increase in available housing. 

As more families are priced out of home buying, builders are turning to construction of multi-family units that are more conducive to renting. A new record amount of multi-family units are under construction for the fourth month in a row, data from shows.

If incomes were to rise substantially, that growth could also play a role in pushing the typical American below that 30% rent-to-income ratio. A recent Zillow report found rent affordability is better in cities with minimum wages higher than the federal rate of $7.25 an hour.

In cities with minimum wages above $7.25 it takes an average of 2.5 full-time minimum wage workers to make the typical two-bedroom rental affordable, meaning renters would spend no more than 30% of their income on rent.

In cities with a $7.25 minimum wage, it takes an average of 3.5 full-time workers to meet this threshold.

“Income disparity does really play a big role and impact the affordability outlook for a lot of renters,” Bachaud said.

And while higher incomes could drive up rents, they could also allow renters to better afford units.

Is any relief for renters in sight?

Several moves from the federal government could also help improve the situation.

In January, President Biden introduced a “Blueprint for a Renters Bill of Rights.” The initiative includes a set of principles aimed at making rents more affordable and strengthening tenant protections.

As part of the blueprint, several agencies agreed to actions to improve housing affordability and access. These could include curbing rent hikes for certain properties or addressing practices that prevent consumers from retaining housing.

The U.S. Department of Housing and Urban Development will also award $20 million to fund nonprofits and agencies providing legal assistance to low-income individuals at risk of eviction.

The release follows the Department of the Treasury’s reallocation of nearly $700 million to assist renters facing financial hardship in January. The allotment was made thanks to the 2020 Federal Emergency Rental Assistance (ERA) program, which has reallocated more than $3.5 billion to families since the program’s inception.  

Rents are expected to stabilize over the next year as new construction is expected to increase the number of available units. Some experts, however, are pessimistic that any of these initiatives will cause rents to fall, rather than just rise at a slower rate.

Rents will likely stay high for a while.